Martinrea International Inc. · TSX:MRE
Martinrea International — Investor Presentation (November 2023)
66 slides from Martinrea International's investor presentation, November 2023
Slide 1: Investor Presentation November 2023
INVESTOR PRESENTATION NOVEMBER 2023 ©2019 Martinrea International Inc.
Slide 2: Legal Disclaimer
LEGAL DISCLAIMER This presentation contains forward-looking statements within the meaning of applicable securities laws (“forward-looking statements”), including, but not limited to, statements relating to the Company’s beliefs or views or expectations of, improvements in, expansion of and/or guidan
Slide 3: Industry Overview
INDUSTRY OVERVIEW Prracrixer a]
Slide 4: US Light Vehicle Sales (SAAR)
US LIGHT VEHICLE SALES (SAAR) • US auto sales remain resilient, despite inflation and interest rate headwinds U.S. Light Vehicle Sales (SAAR) 20 U.S. Light Vehicle SAAR Millions of Units 15 averaged 15.6M units in the third quarter, which was flat over the 10 second quarter. October SAAR was also 15
Slide 5: US Light Vehicle Inventory Days
US LIGHT VEHICLE INVENTORY DAYS • US light vehicle inventories have been rising, though remain low by historical standards US Inventory Days January 2020 October Outstanding (pre-pandemic) 2023 Passenger Cars 69 34 CUVs/SUVs 73 42 Light Trucks 98 68 All Vehicle Types 76 46 Source: Wards Intelligence
Slide 6: Business Overview
BUSINESS OVERVIEW Prracrixer a]
Slide 7: Martinrea Overview
MARTINREA OVERVIEW Leading Tier One automotive supplier in lightweight structures and propulsion systems One of the fastest growing automotive parts suppliers since 2001 Operating in 59 locations (including sales and engineering centers) in 10 countries: Canada, United States, Mexico, Brazil, German
Slide 8: Martinrea Culture, Vision, Mission and Principles
MARTINREA CULTURE, VISION, MISSION AND PRINCIPLES VISION 10 GUIDING PRINCIPLES Making lives better by being the best supplier we can be in Our success will be based on the execution of our guiding the products we make and the services we provide. principles, applied with integrity, in all that we do
Slide 9: Martinrea Vision – Making Lives Better
MARTINREA VISION – MAKING LIVES BETTER www.martinrea.com | 9
Slide 10: Martinrea's Global Presence
MARTINREA’S GLOBAL PRESENCE www.martinrea.com | 10
Slide 11: Our Journey
OUR JOURNEY www.martinrea.com | 11
Slide 12: Martinrea Products and Capabilities
MARTINREA PRODUCTS AND CAPABILITIES Assembly Powertrain Body-in-White and Chassis Fluids Industrial www.martinrea.com | 12
Slide 13: Competitive Landscape
COMPETITIVE LANDSCAPE STEEL METAL FORMING FLUID MANAGEMENT SYSTEMS ALUMINUM COMPONENTS PRIMARY OTHER www.martinrea.com | 13
Slide 14: See Martinrea
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Slide 15: Company Business Unit Deployment Plans
Martinrea 2.0 is the framework to be a great company… diverse people and groups working together toward a single vision. • Fostering principles-based leadership • Promoting positive behaviours • Creating a strong lean culture • Implementing best practices COMPANY BUSINESS UNIT FIRST PLANT DEPLOYMENT
Slide 16: Martinrea's Manufacturing System
MARTINREA’S MANUFACTURING SYSTEM • The way we think – Learn to unlearn – attack waste • Pride kills continuous improvement – Pride for your people not for your practice – Be humble, there is always a better way • Engaging our people at all levels – Developing and respecting our people – Learning by
Slide 17: Report Card
REPORT CARD • Martinrea 2.0 framework has proven to be effective • Results from 2014 to 2019 speak for themselves: – 72% improvement in safety – 34% improvement in quality – Doubling of Adjusted Operating Income Margin from ~4% to north of 8% (excluding the impact of the UAW GM strike and higher too
Slide 18: Process Innovation
PROCESS INNOVATION Prracrixer a]
Slide 19: The Way We Produce
THE WAY WE PRODUCE www.martinrea.com | 19
Slide 20: Martinrea Flexible Build Process
MARTINREA FLEXIBLE BUILD PROCESS Past 40% Less Capital Demand Up 18% Less Labour 20% Less Space Flexes With Volume Demand Down Flex Labour with Volume: No Flex labour with Volume: Yes Lifespan: 6 Years Lifespan: 12+ Years Tooling change-over: 4 weeks Tooling change-over: 30 Minutes Service part Capa
Slide 21: Product Innovation
PRODUCT INNOVATION Prracrixer a]
Slide 22: Project Breakthrough
Launched in 2019, Project Breakthrough target was to: • Grow revenue and margins by providing engineered products with higher value-added content to our customers – More multi-material content to further lightweight – Create reliable product engineering source to our customers • Create long-term dee
Slide 23: Martinrea's Commercial Groups
MARTINREA’S COMMERCIAL GROUPS Flexible Manufacturing Group www.martinrea.com | 23 ©2019 Martinrea International Inc. ©2020
Slide 24: A Closer Look at Breakthrough Progress
A CLOSER LOOK AT BREAKTHROUGH PROGRESS
Slide 25: Geely PMA-1 EV Rear Sub-Frame
GEELY PMA-1 EV REAR SUB-FRAME • Fully design responsible • Hollow low-pressure die cast aluminum • MIG welding, low pressure die cast to extrusions • Complete machining and final assembly www.martinrea.com | 25 ©2019 Martinrea International Inc. ©2020
Slide 26: Lucid Air Body-in-White Aluminum Die Cast Components
LUCID AIR BODY-IN-WHITE ALUMINUM DIE CAST COMPONENTS • Front Shock Tower • Front Torque Box • Rear Torque Box – Vacuum high-pressure die cast – High dimensional requirements www.martinrea.com | 26 ©2019 Martinrea International Inc. ©2020
Slide 27: Stellantis Jeep Grand Cherokee Front Rail Assembly
STELLANTIS JEEP GRAND CHEROKEE FRONT RAIL ASSEMBLY • Hydro-formed upper tail • Aluminum high-pressure die cast shock tower • 3rd Gen advanced high-strength steel • Self-pierce riveting (SPR) and structural adhesive joining • Thin-gage electro-galvanized steel MIG weld www.martinrea.com | 27 ©2019 Ma
Slide 28: Ford Mach-E Front and Rear Sub-Frames
FORD MACH-E FRONT AND REAR SUB-FRAMES • Fully responsible for design, development and validation • Multi-material front subframe – Low-pressure die cast hollow aluminum rear – Structured for optimal stiffness, mass and dimensional control – Welded steel front structure for management of front impact
Slide 29: Lucid Air Front and Rear Sub-Frames
LUCID AIR FRONT AND REAR SUB-FRAMES • Front Sub-frame – Aluminum front sub-frame features leading- edge multi-process architecture – Joined using structural adhesive – Hollow low-pressure die cast and extrusion components • Rear Sub-frame – Aluminum one-piece hollow low-pressure die cast www.martinr
Slide 30: Daimler EVA II Platform – Roof, Rear Panel, Underbody
DAIMLER EVA II PLATFORM – ROOF, REAR PANEL, UNDERBODY • Higher value system solutions – Utilizing new advanced joining technologies in mixed material solutions – High-strength steel, hot-formed steel, Ultra High-Strength Steel – Stamped, extruded and cast aluminum components www.martinrea.com | 30
Slide 31: Brake Lines with GrapheneGuard
BRAKE LINES WITH GRAPHENEGUARDTM • High-performance brake line coating with graphene – Industry leading abrasion protection – Provides up to 25% weight savings – Improved chemical resistance and high temperature performance • Approved at Ford, GM, and Stellantis • In production at Ford and GM – Ford
Slide 32: Recent Awards
RECENT AWARDS • 2022 JLR Quality Award • 2022 Automotive News PACE Award • 2022 Toyota Excellent Quality Performance Award • 2022 Nissan Supplier Best Practice Award • 2022 Tenneco's Supplier Quality Excellence Award • 2022 Lucid Outstanding Supplier Award • 2021 Nissan Supplier Diversity Over Achie
Slide 33: Growing Technology and Innovation
GROWING TECHNOLOGY AND INNOVATION IDEA RESEARCH DEVELOP TESTING ANALYSIS INTRO MARTINREA TECH CENTER www.martinrea.com | 33
Slide 34: Lightweight/Electrified Vehicles Drive Need for More Advanced Products
LIGHTWEIGHT/ELECTRIFIED VEHICLES DRIVE THE NEED FOR MORE ADVANCED PRODUCTS 2024E 2028E 27% 46% 54% 73% ICE Platforms BEV/Hybrid Platforms ICE Platforms BEV/Hybrid Platforms www.martinrea.com | 34
Slide 35: Addressable Content Per Vehicle
ADDRESSABLE CONTENT PER VEHICLE www.martinrea.com | 35
Slide 36: A Closer Look at EV Transition
A CLOSER LOOK AT EV TRANSITION Internal Combustion Hybrid Electric Vehicle (EV) Engine (ICE) 80% of products are agnostic to electrification 20% of products transitioning with market change www.martinrea.com | 36
Slide 37: Select Pure Electric Vehicle Platforms in Martinrea Portfolio
SELECT PURE ELECTRIC VEHICLE PLATFORMS IN MARTINREA PORTFOLIO SOP: 2020 SOP: 2022 SOP: 2023/2024 Ford Mach-E Mercedes Benz Audi PPE Aluminum front EVA2 Body and chassis and rear subframes Body and chassis structures, e-motor structures housing Samsung Geely PMA 1 GM BEV 3 Aluminum battery Aluminum r
Slide 38: Whatever the Future Holds, Martinrea Will Be a Leader
WHATEVER THE FUTURE HOLDS, MARTINREA WILL BE A LEADER www.martinrea.com | 38
Slide 39: New Product Introduction – Brake Lines with GrapheneGuard
NEW PRODUCT INTRODUCTION – BRAKE LINES WITH GRAPHENEGUARDTM We are currently producing our GrapheneGuardTM brake line product on four programs with two of our largest customers www.martinrea.com | 39
Slide 40: Spotlight on Graphene
Extremely SPOTLIGHT ON GRAPHENE strong (200x Lightweight stronger than steel) Unique A high-performance material with Higher thermal electromagnetic and electrical properties game-changing potential conductivities compared to Silver and Noise Copper reducing Extremely properties impermeable Almost c
Slide 41: Spotlight on Graphene
SPOTLIGHT ON GRAPHENE • Some Potential Applications – Automotive – Transportation – Renewable Energy – Industrial – Agricultural – Batteries (including Li ion for EV applications) – Recycled Plastics – Paints • We are excited about the technology that graphene provides and its opportunities through
Slide 42: Martinrea Innovation Development (MiND)
MARTINREA INNOVATION DEVELOPMENT (MiND) Purpose Investments NanoXplore – Hold a 22.7% interest Incubate, develop, and fund innovative AlumaPower – Company developing technologies that are strategic to aluminum air battery technology for a variety Martinrea’s portfolio of end markets Effenco – Acquir
Slide 43: Effenco
EFFENCO® • Acquired assets of Montreal-based Effenco® Development Inc. in 2022 • Effenco® designs, manufactures and markets ultracapacitor systems, which reduces: • The Effenco® Hybrid electric solution is focused on the heavy-duty vocational truck market • Effenco® is a Global Cleantech 100 company
Slide 44: Environmental, Social, Governance
ENVIRONMENTAL SOCIAL GOVERNANCE
Slide 45: What Sustainability Means to Martinrea
WHAT SUSTAINABILITY MEANS TO MARTINREA We build a sustainable business through making people’s lives better by: • Providing meaningful opportunity, job satisfaction and job security for our people • Delivering outstanding quality products and services that contribute to the safety, lightweighting, a
Slide 46: Environmental
ENVIRONMENTAL • CDP score of B in 2022 (up from C in 2021) • Energy intensity has been reduced by 16% since 2019 • Carbon intensity has been reduced by 19% since 2019 • 42% of electricity consumed comes from renewable sources • Zero landfill initiatives • Lightweighting strategy can help to improve
Slide 47: Social
SOCIAL • Treating people the way they want to be treated, with dignity and respect (Golden Rule) • Employee Bill of Rights in place • Workplace health and safety is a key priority • Belief in open, honest two-way communication supported by visible, responsible action • Open Door Policy www.martinrea
Slide 48: Social (Continued) – Diversity, Equity and Inclusion
SOCIAL (CONTINUED) Diversity, Equity and Inclusion • Gender diversity – – Promoting women in automotive careers, leadership, STEM and trades – Women comprise 23% of Martinrea’s workforce and 18% of management and above positions – 33% of our Board of Directors is female • Culturally diverse workforc
Slide 49: Social (Continued) – Community Involvement
SOCIAL (CONTINUED) Community Involvement • “Making People’s Lives Better” – global charitable giving program • Sponsorship of University co-op programs and STEM programs such as First Robotics • Partnership with Givesome to support global outreach through volunteer time, service, and donations www.m
Slide 50: Social (Continued) – Supplier Quality Guidelines
SOCIAL (CONTINUED) Supplier Quality Guidelines and Assessments • Product Safety and Quality Assurance • Social Responsibility • Environmental Sustainability • Code of Conduct and Ethics • Diversity, Equity and Inclusion www.martinrea.com | 50
Slide 51: Governance
GOVERNANCE • Independent Board (7 of 9 members); 100% of committee members are independent • “Pay for Performance” – significant portion of total compensation is variable, based on performance (i.e., bonus based on pre-tax income, equity-based compensation) • Business ethics a top priority • Whistle
Slide 52: Financials
FINANCIALS | MARTINREA J
Slide 53: Sales
SALES Assembly business changed to a purchased 5,500 component consignment model resulting in 5,338 decrease in 2017 despite same level of production 424 5,000 Driven by 4,758 253 COVID-19 162 302 4,500 pandemic 211 245 In Millions (CAD) 3,968 4,000 3,867 3,864 3,784 162203 253 3,690 3,663 3,599 405
Slide 54: Top North American Vehicle Platforms
TOP NORTH AMERICAN VEHICLE PLATFORMS 1. GM Pickups/SUVs 6. Ford F-150 2. Ford Escape / Maverick 7. Ford Edge 3. Jeep Grand Cherokee 8. Ford Mustang Mach-E 4. GM Equinox/Terrain 9. Nissan Pathfinder 5. Jeep Wagoneer/ 10. Dodge Challenger/Charger Grand Wagoneer www.martinrea.com | 54
Slide 55: Highlights of Recent New Business Awards
HIGHLIGHTS OF RECENT NEW BUSINESS AWARDS APPROX. ANNUALIZED SOP RANGE APPROX. ANNUALIZED SOP RANGE SALES AT PEAK VOLUME SALES AT PEAK VOLUME $535 M 2021 – 2026 $55 M 2021 - 2024 $300 M 2021 – 2023 $50 M 2021 – 2023 $290 M 2021 – 2024 $40 M 2022 – 2025 $235 M 2021 – 2026 $30 M 2021 – 2023 $110 M 2022
Slide 56: Adjusted Operating Income Margin
ADJUSTED OPERATING INCOME MARGIN Decrease due to the impact of the UAW- 9% GM strike and higher tooling sales 8% 7.8% 7.5% ADJUSTED OPERATING INCOME MARGIN % 7% Driven by COVID-19 6.4% pandemic 6% and related supply 5.8% shortages 5% 5.0% 4.8% 4.6% 4% 4.1% 3.7% 3% 2% 1.8% 1% 0% 2014A 2015A 2016A 201
Slide 57: Adjusted Net Earnings Per Share
ADJUSTED NET EARNINGS PER SHARE Decrease due FULL YEAR FINANCIALS to the impact $250.00 of the UAW- $2.41 $2.50 EPS supported by share repurchases in 2018 and 2019 $2.27 GM strike $2.22 Driven by $200.00 $1.91 $2.00 chip and 193 Driven by other 193 IN MILLIONS OF CANADIAN DOLLARS 188 COVID-19 supply
Slide 58: Cash Flow
CASH FLOW Decrease driven by COVID-19 pandemic OPERATING CASH FLOW - BEFORE CHANGES IN WORKING CAPITAL ($ MILLIONS) and related supply shortages $800 $600 $648 $400 $508 $524 $461 $406 $348 $358 $321 $200 $308 $259 $0 2014 2015 2016 2017 2018 2019 2020 2021 2022 LTM CASH CAPEX ($ MILLIONS) Capex ant
Slide 59: Q3 2023 Update
Q3 2023 UPDATE Prracrixer a]
Slide 60: Status of Operations
STATUS OF OPERATIONS North 75% Q3 2023 Production Sales America 22% Q3 2023 Production Sales Europe 3% Q3 2023 Production Sales Rest of World • Adjusted Operating Income Margin • Adjusted Operating Income Margin • Adjusted Operating Income Margin declined quarter-over-quarter, mainly improved quarte
Slide 61: 2023 Year-to-Date Financial Highlights
2023 YEAR-TO-DATE FINANCIAL HIGHLIGHTS (AS OF SEPTEMBER 30) YTD TOTAL SALES YTD ADJ. OPERATING YTD ADJ. OPERATING $4,500 $4,043.9 INCOME INCOME MARGIN $4,000 $240.6 $3,463.0 $250 $3,500 7.0% 6.0% $200 6.0% $ Millions $3,000 $159.6 5.0% 4.6% $ Millions $2,500 $150 4.0% $2,000 3.0% $100 $1,500 2.0% $1
Slide 62: Balance Sheet
BALANCE SHEET NET DEBT - Excluding IFRS-16 ($ Millions) $1,200.0 $1,000.0 Q3 2023 net debt (excluding the impact $800.0 of IFRS-16) declined by approximately $600.0 $48 million compared to Q2 2023. $908.7 $955.9 $937.4 $889.2 $400.0 $857.7 $662.6 $682.4 $200.0 Net-debt-to-Adjusted EBITDA continued $
Slide 63: Capital Allocation Framework
CAPITAL ALLOCATION FRAMEWORK Invest to Maintain and Maintain Strong Return Capital Grow Our Business Balance Sheet to Shareholders • Organic opportunities • Targeted Net Debt/Adjusted • Repurchase shares with • Invest in R&D and product EBITDA ratio of ~1.5x over excess liquidity offering time (at t
Slide 64: Biographies
BIOGRAPHIES Pat D’Eramo joined Martinrea International Inc. as President and Chief Executive Officer in November 2014 and was elected to the Board of Directors in June 2015. D’Eramo has a long and successful career in the automotive business, with extensive metalforming and parts manufacturing exper
Slide 65: Biographies
BIOGRAPHIES Rob Wildeboer is the Executive Chairman and co-founder of Martinrea International Inc. He brings a deep and intricate knowledge of the Company’s culture, key personnel, strategy, history and development, and relationships with key constituencies such as capital providers and governments,
Slide 66: Biographies
BIOGRAPHIES Fred Di Tosto joined Martinrea International Inc. as Vice President of Finance in June of 2010 and then became the Company’s Chief Financial Officer in March of 2011. Di Tosto’s scope of authority includes executive guidance and direction in the following areas: Corporate and Operational
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